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home / insurance / in the media

Associated Press
May 02, 2000

by Steve Lawrence

Freeze proposed on fund created by Quackenbush

Lawmaker wants Northridge quake victims to benefit
SACRAMENTO -- A lawmaker wants to freeze $6 million in a fund created by state Insurance Commissioner Chuck Quackenbush. The legislator said he wants to make sure the money reaches Northridge earthquake victims.

Quackenbush has been under heavy criticism for letting a half-dozen insurers avoid the possibility of more than $3 billion in fines for their handling of Northridge quake claims by contributing nearly $12 million to the nonprofit California Research and Assistance Fund last year.

He acknowledged at an Assembly Insurance Committee hearing last week that, while the fund's purpose was seismic research and consumer aid, none of the money has gone to earthquake victims.

Critics say at least $5 million was used in ways that may have politically benefited the Republican commissioner.

Committee Chairman Jack Scott said yesterday that he has asked the Legislature's attorneys whether lawmakers have the power to put a hold on the money to prevent it from being used for other purposes.

Scott, D-Pasadena, said many Los Angeles victims of the 1994 earthquake have been "four-time losers."

"Their homes were devastated by the earthquake," he said. "Their claims for compensation were sometimes botched by insurers. Their legal enforcement rights were bargained away by regulators, and they didn't get a penny of restitution from the foundations supposedly set up for their benefit."

Some of the fund was spent on public-service TV ads featuring Quackenbush, and some went to nonprofit groups that have no connection to earthquakes but do have ties to Quackenbush.

The Legislative Counsel's Office, the Legislature's attorneys, has said Quackenbush did not have the authority to allow the insurers to avoid fines by contributing to the foundation.

Scott said he would introduce legislation requiring that any future fines or other funds paid in insurance settlements go to victims.

He said he also wanted to draft legislation freezing the money remaining in the fund and requiring that it be used within a certain time to help victims of the Northridge quake, which killed 72 people and caused $25 billion in damage.

But Scott said there was a question about whether lawmakers could take that step because the money was paid through a contract with a nonprofit agency.

Quackenbush has asked the fund and two other foundations he set up not to make any more expenditures until an advisory panel recommends how to improve the foundations' operations, said Dan Edwards, a spokesman for the commissioner.

Quackenbush also agreed that fines imposed on insurers should go to consumers and not to the state general fund, Edwards said.

Harvey Rosenfield, a consumer advocate and insurance industry critic, said he doubted that lawmakers could freeze the fund's assets.

"Only the attorney general and the courts can do that," Rosenfield said.

He said Scott and other lawmakers should be focusing on whether Quackenbush should be impeached.

"Victims don't need the proceeds of fines," Rosenfield said. "They need to get their claims paid."

In addition to the Assembly committee, the Senate Insurance Committee and Attorney General Bill Lockyer are investigating Quackenbush's creation and use of the fund.


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